I stumbled on a new working paper that examines the return on the S&P 500 Index during the World Cup over the last 60 years. The study concludes that the S&P 500 declined by 2% on average during the Cup, so shorting the S&P 500 would have been a profitable investing strategy. The author claims that this decline reflects reduced productivity while the Cup is played (for the record I have the France-Mexico match on the TV while writing this post – what productivity decline?), much like the well-documented calendar effects.
The “paper” has the lousiest formatting I have ever seen (black background? yeah, that’s a great idea!), and is a little sketchy on methodological details. My biggest problem with the paper is the use of the S&P 500. People in the US don’t really care passionately about the World Cup. I think the onus is on the author in this case to convince readers that the observed returns are not simply spurious. Why not use an international stock index of some sort? I would be more convinced if the DAX or FTSE declined during the Cup.